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What happens if your SMSF is non compliant?

Posted on May 14, 2020 by admin

While there are benefits to running an SMSF, they do not come without their compliance responsibilities. This includes lodging your fund’s annual return on time, attending to reporting obligations, and having an investment strategy. SMSFs who do not meet their obligations are subject to penalties by the ATO through the following measures.

Education direction

An SMSF trustee who does not meet compliance requirements can be given a written direction to undertake a course of education that is designed to improve their ability to meet their obligations, reducing the risk of future non-compliance. The course may be completed online within a nominated timeframe. Failure to comply with an education direction can result in an administrative penalty of 10 units.

Administrative penalties

SMSF trustees are liable to pay administrative penalties if they contravene provisions of the Superannuation Industry (Supervision) Act 1993 (SISA). This includes contraventions of borrowings, in-house assets, education direction, duty to notify of significant adverse events, and accounts and statements. The minimum penalty is $1,050 and the maximum penalty is $12,600.

Enforceable undertaking

SMSF trustees may be able to rectify non-compliance by providing a written commitment to an enforceable undertaking. The ATO may or may not accept the undertaking, which should include:

Rectification direction

The ATO may decide to provide a trustee with written direction to rectify their contravention. The trustee will then be required to undertake specified action to rectify the non-compliance within a given timeframe. Rectification commonly involves employing managerial or administrative arrangements that will prevent similar contraventions in the future. Proof of compliance with the direction to rectify will be required. Failure to comply with the direction is an offence of strict liability, which can lead to disqualification or the removal of the fund’s complying status which may result in a significant tax penalty on the fund.

Disqualification

The ATO has the ability to disqualify individuals from acting as a trustee due to their non-compliance. This will take into account the severity of the contraventions and the likelihood of them reoccurring. Continuing to act as a trustee after disqualification is an offence that may result in further penalties.

Civil and criminal penalties

Civil and criminal penalties through court can apply when SMSF trustees contravene with provisions such as:

Non-compliance notice

SMSFs may be issued a notice of non-compliance when serious contravention of super laws have occurred. This causes the fund to remain non-compliant until a notice of compliance is received. For every year the fund remains non-complying, its assessable income is taxed at the highest marginal tax rate.

Winding up the fund

After a contravention has occurred, the trustee may wind up the SMSF and roll over the remaining benefits to an Australian Prudential Regulation Authority (APRA) regulated fund. However, in some cases, the ATO may continue to issue the SMSF with a notice of non-compliance and/or apply other compliance measures.

Freezing the SMSF’s assets

A trustee may be given a notice to freeze an SMSF’s assets when it appears that conduct by the trustees or investment manager may adversely affect the interests of the beneficiaries. The notice may restrict the trustee or investment manager from acquiring assets and disposing of assets.

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How to support your employees through COVID-19

Posted on May 18, 2020 by admin

Supporting your employees during chaotic times as an empathetic leader will improve your relationships within your business and boost personal confidence. Here are some ways you can support your employees mentally and financially during these uncertain times.

Be open with your employees
As businesses implode due to current economic circumstances, employees want transparency and closure over the state of the business and their employment. Thus, being open about your business’ finances and both your short-term and long-term growth initiatives when communicating with your employees will earn their trust and appreciation.

Being transparent over your employees’ job security is also a good idea, as unemployment is becoming a major concern for all Australians. Reassuring your employees and guaranteeing their safety will also boost productivity levels and business morale as a major source of anxiety is lifted off of their shoulders.

Take mental health seriously
You can support your employees’ mental health by encouraging a healthy work-life balance (especially if they are working from home) as well as offering tutorials, professional mentoring sessions and online webinars on mindfulness and effective stress management strategies. Be more lenient with your employees who are struggling with productivity due to mental fatigue and enforce healthy lifestyle habits.

Another way to protect your staff’s mental health is to give all your employees financial advice and education, even if they are not struggling financially at the moment. Let them know that you care for their livelihood and can support them with constructive guidance.

Take care of your staff’s physical health
Taking care of your employee’s physical health as well as their mental health will also relieve your employees’ stress levels and give them peace of mind when working with you. Allow your employees to work from home whenever possible and provide disinfectants like hand sanitiser and alcoholic wipes in your workspace to reinforce health precautions. Enforce social distancing procedures such as the 1.5m distance rule and strive to eliminate physical health risks related to your employees. It is vital that no employee comes to work if they are feeling sick.

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